Washington Park's promise attracting money, faith

Craig Huffman (right) and John Puntillo, co-founders and managing directors of Ascendance Partners LLC, tour a building they are developing on Martin Luther King Drive in Chicago. They are raising $25 million in private equity to develop real estate on the mid-South Side.

Craig Huffman (right) and John Puntillo, co-founders and managing directors of Ascendance Partners LLC, tour a building they are developing on Martin Luther King Drive in Chicago. They are raising $25 million in private equity to develop real estate on the mid-South Side. (Tribune photo by Terrence Antonio James)

Craig Huffman comes to the private-equity world with a multifaceted set of credentials: two master's degrees from the University of Chicago, stints in the non-profit world, and a stretch as a rehabber of distressed properties.

Now Huffman is ready to make some big money, and he is zeroing in on a real estate market that until recently was all but forgotten: Chicago's Washington Park neighborhood, one of the city's poorest and bleakest.

Along with business partner John Puntillo, they are raising $25 million in private equity to leverage into $100 million worth of real estate on the mid-South Side, including areas such as Woodlawn and Grand Boulevard. Already, they have convinced some of the city's best-known developers -- Michael Alter, Larry Freed and Stephen Quazzo -- to invest in their Ascendance Capital Partners I fund.

"A lot of investors have moved to the sidelines," he said. "We have demonstrated you can deliver outsized returns in these neighborhoods where, for years, there has been disinvestment."

Despite its long-standing problems, Washington Park has a certain cachet these days.

The neighborhood has an ample supply of vintage apartment buildings. It is 20 minutes from downtown. But most important, it would be home to an Olympic stadium should Chicago win the 2016 Summer Games, a decision due in October 2009. That possibility is attracting some speculators who believe the Games could spark rapid redevelopment.

"If Chicago gets the Olympics, I think you'll see a lot of guys running down to the best of this area," predicts Huffman, leaning back in a swivel chair in his no-frills office on Wacker Drive. "Our view is the Olympics can only help. But we still feel good about this market whether the Olympics happen or not."

Vacant lots that the city was unloading for $1 now sell at market rates. A few pioneering developers are building single-family homes and rehabbing apartments into condos. The city's Department of Planning and Development recently issued a call to developers to come up with plans for a 3.5-acre parcel at 60th Street and Martin Luther King Drive, at the southwest corner of the park. And Rev. Richard Tolliver, an activist Episcopalian minister who has led the way in development of affordable rentals, is planning a first foray into homes for purchase.

A revival was bound to happen, some say, because of the neighborhood's location next to sprawling Washington Park.

The 372-acre park, with its lagoons, walking paths and wide open playing fields, is a cornerstone of the historic South Side park system designed in 1871 by landscape architect Frederick Law Olmsted. Via the Midway Plaisance, it links to Jackson Park on the south lakefront. Architect Daniel Burnham's firm designed several buildings in the park.

Still, some parts of Washington Park have so many vacant lots and boarded-up buildings that they resemble rural areas more than city streets. While acknowledging Washington Park has been tougher to kick-start than some other city neighborhoods, Arnold Randall Jr., the city's commissioner of planning and development, says its time has come. "This is one of the areas next in line to be redeveloped."

That could be wishful thinking, but a number of potential catalysts are in place, observers say.

The Near South Side real estate revival is moving steadily southward. Crime-plagued public housing towers have come down and are being replaced with mixed-income residential developments.

Washington Park takes in part of two city wards, and both of them elected new, development-minded aldermen last year: Urban development specialist Pat Dowell edged out Dorothy Tillman, a flamboyant and controversial fixture in the 3rd Ward, while retired Chicago police sergeant Willie Cochran beat embattled Arenda Troutman in the 20th Ward. Troutman, who has been indicted on bribery charges, has denied any wrongdoing.

But the near collapse of the mortgage lending market has hit Washington Park particularly hard. Even though real estate prices are relatively low, fewer buyers are showing up for open houses, and financing has become much harder to swing. Foreclosures rose more than 70 percent between 2005 and 2007.

"People are hanging in limbo, waiting to see where it is going," said Joyce Ellis-Johnson, who together with her husband has done small-scale redevelopment in the neighborhood. "You can lose your cuckoos if you're not careful."

Area long overlooked

Washington Park, which runs from 51st Street to 63rd Street between Cottage Grove Avenue and the Dan Ryan Expressway, has long been overshadowed by its highbrow neighbor to the east: Hyde Park.

Once a comfortable enclave in Chicago's "Black Belt," Washington Park was abandoned long ago by lenders, insurers, retailers and most of its middle class. Population has fallen to 13,484, from 90,000 in 1970, and the unemployment rate is 21 percent. Washington Park's median household income is $20,000, far below the city's median of $45,000.

A block south of the park, battered plywood covers most of the commercial strip on 61st Street between King Drive and Vernon Avenue. Metal grates protect the windows of the few functioning businesses left, such as the Bubble laundromat and a fish-and-chicken carryout.

On a rainy Sunday afternoon, Katrina Taylor was taking another look at a four-bedroom condo for sale at the Georgian Place, a fully rehabbed six-flat just a half-block from the forlorn commercial strip.

Like a slice of Lincoln Park, the brick six-flat's entryway is clad in Italian marble, and the apartment sports oak floors, recessed lighting, granite countertops and stainless steel appliances. The sprawling flat is easy to love, especially since the price has come down about $50,000 in recent months, to $259,900.

"I really like the unit itself, but the block, I'm not too crazy about," said Taylor, a South Shore resident who works as a tax manager for Baxter International in Deerfield.

Realtor Donna Schwan is a big fan of the area, and she has worked with developers there, encouraging them to add luxurious touches. The firm she founded, MetroPro Realty, has the Georgian Place listing.

"This market requires a great master suite. Without that, they don't sell," she said. "If the Olympics come here, you're not going to be able to buy a blade of grass."

Of course, such talk plays into some residents' concerns that they will be financially forced out of the neighborhood, where 90 percent of the housing is rental and 97 percent of the population is black.

Fear of being pushed out

With almost half of Washington Park households earning less than $15,000 a year, it is unlikely many buyers of condos or new homes will be people who live there now.

"I would love to see the Olympics come. I know it would renovate the area and bring it back to what it was when I was a child," said Murray Johnson, a 67-year-old retired truck driver who has lived in the neighborhood since 1950. "But I worry. Would I be able to live here?"

Johnson, who is president of the Washington Park Neighborhood Association, said seniors fear escalating living costs and property taxes.

City officials say they are committed to protecting existing residents using a variety of tools, from requiring affordable housing units in new developments to preserving the affordability of subsidized units through the use of land trusts.

"There are a lot of good people living [in Washington Park], a lot of working-class families and we want those folks to be able to stay," said Randall, the city's planning commissioner. "But we also feel there is an opportunity to get a lot of other people to move into the neighborhood and make it a better place."

Of course, playing host to an Olympic event is not enough to ensure a local real estate boom.

That depends on how much new construction is done and what sort of infrastructure improvements are made to support it, states a study of Olympic impact by real estate firm Jones Lang LaSalle.

Seoul and Barcelona built entirely new neighborhoods to house Olympic athletes, and those cities felt a true "Olympic effect" because those redeveloped urban areas attracted new residents after the games, according to the study.

However, Atlanta didn't experience the same outcome. During the 1996 Olympics, Atlanta largely used existing facilities such as college dorms to house athletes and the city did not undergo large-scale residential construction around its Olympic precinct.

If history is a guide, then, the Olympic Village planned farther north near McCormick Place and Michael Reese Hospital has greater potential to transform the cityscape than does a stadium in Washington Park.

Stadiums have proven to be valuable redevelopment tools in some cities and white elephants in others.

The stadium planned for Washington Park is a kind of hybrid. During the games, it would seat 80,000 visitors, but after the events are over, the stadium would be radically downsized to 5,000 seats, which would be too small for major sporting events.

"I still don't see the logic of a stadium in Washington Park, especially when it will go away," says Kim Goluska, urban planner and head of Chicago Consultants Studio.

Yet city planners still believe the stadium could serve as a psychological magnet for the area, and they intend to make the most of it.

Churches lead push

In its quest for development proposals, city planners paired the 3.5-acre parcel at 60th and King with another one in Woodlawn, a rapidly evolving neighborhood that runs along the southern edge of the University of Chicago. They also made clear the city would consider tax breaks for both sites.

No developers turned up at a recent informational meeting, but the city said interest has built since then.

So far, Washington Park's most avid developers remain its churches, such as St. Edmund's Episcopal, Church of the Good Shepherd and Coppin African Methodist Episcopal.

St. Edmund's Redevelopment Corp., which Tolliver heads, already has rehabbed more than 500 rental units at a cost of $50 million in Washington Park.

"Father Tolliver had the vision to develop Washington Park when no one else would," said Tasha Baker, program director for the development corporation.

Two more projects are in the St. Edmund's pipeline, including its first move into affordable homes for purchase, aimed at first-time buyers. Almost 40 single-family homes and duplexes are planned, with construction set to break ground in the fall. Single-family home prices are capped at $165,000, while duplexes would go for $210,000 for both units.

These sorts of projects "are priming the pump or sparking the market to get market-rate housing to follow," Randall said.

That's what Huffman and his investors hope, and the current slowdown could translate into opportunities for his real estate fund.

To get an idea of the kind of development Huffman believes Washington Park can support, take a look at a $1 million renovation under way on an 1892 Bronzeville graystone purchased for $675,000 last September. A rat-infested board-up with fire damage and a collapsing roof, the former rooming house is being gutted and restored to eight units.

On a sunny February afternoon, Huffman and Puntillo gave a tour to Tracy Nicholas, a vice president of Alter Consulting Group.

She will advise them on how to make their vision of newly restored luxury rentals work on larger-scale properties, some likely to be in Washington Park.

With the roar of construction heaters in the background, they stepped around a pile of red oak floorboards and pointed out the gas fireplace in the living room, the wiring for surround-sound and security systems. They hope to rent the 1,800-square-foot units for $1,700 to $1,800 a month, which would produce a net return of 18 percent for investors.

Gazing from the back deck off the master bedroom, though, it's hard to miss a nearby boarded-up six-flat. "Clearly the area needs more investment," Huffman said.

Tropical birds chirping. Children playing baseball and soccer in Kenwood Community Park. Students rushing off to Kenwood Academy High School. Such are the sights and sounds on a recent stroll through the Kenwood neighborhood on Chicago's South Side.

Student housing is getting a makeover along with the 121-year-old Old Colony Building in the heart of Chicago's Loop. The former office space built in 1894 by architecture firm Holabird and Roche, is undergoing a conversion into dorm-style apartments.

Could a little-noticed policy change by giant mortgage investor Fannie Mae help homeowners who'd like to move but can't because they're underwater — they owe more to the bank than the likely selling price of their houses? Could it help you?

Q. I am an original owner in a condominium building where the unit owners are faced with a special assessment of over $2 million to repair faulty balconies and water infiltration issues. Our building was built only 10 years ago as new construction. What could we have done to prevent this situation?...